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The dollar on Tuesday hit its highest against the yen since Dec 1, partly on expectations that a stimulus package planned by U.S. President-elect Barack Obama will help the world's largest economy emerge from recession sooner than other industrialised nations. But market players said gains could be limited by investor moves to lock in profits at the highs out of a sense that gains by the Nikkei, which has risen for the past six trading days, may be overheated.
"Though the market may be sustained by hopes for the Obama economic plan, around the time he takes office we'll start to see a lot of company results coming out, and things could start to get tough," said Takashi Ushio, head of the investment strategy division at Marusan Securities.
"People say the market has factored in poor results, with something like 20-30 percent of firms likely to show losses, but what if that number rises to 40 percent? It's anyone's guess if that's been factored in."
The benchmark Nikkei gained 232.60 points to 9,313.44, its highest since early November. The broader Topix rose 2.1 percent to 894.64.
Tech shares were particularly strong performers after their U.S. peers rose as investors bet the sector would benefit from Obama's proposed package of spending and tax-cut measures that would total nearly $775 billion over the next two years.
The Philadelphia Semiconductor Index rose 5.1 percent on Tuesday, lending strength to Tokyo shares.
Though market players had forecast a dip as investors moved to lock in profits, Kyocera Corp and similar companies forged higher, adding to gains made earlier this week.
Kyocera surged 6.7 percent to 7,220 yen, becoming the biggest contributor to the Nikkei 225 by volume weight, followed by Canon Inc, which gained 8.8 percent to 3,230 yen.
Advantest Corp climbed 8.7 percent to 1,660 yen and Tokyo Electron gained 6.3 percent to 3,700 yen.
Exporters forged higher as well, with Honda up 6 percent to 2,110 yen and Toyota Motor Co up 4.6 percent to 3,180 yen. Panasonic climbed 4.8 percent to 1,246 yen.
Government officials were not immediately available to comment on the Mainichi report about government cash injections to regional banks, which would be the first in about two years.
But regional bank shares rose anyway, with Bank of Yokohama gaining 3.7 percent to 532 yen and Fukuoka Financial Group rising 2.9 percent to 389 yen. Shizuoka Bank gained 2.7 percent to 1,042 yen.
(Reporting by Elaine Lies; Editing by Hugh Lawson)
((elaine.lies@thomsonreuters.com; +81 3 6441 1807; Reuters Messaging:elaine.lies.reuters.com@reuters.net))
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